Private Equity Characteristics and Role in Portfolio Quiz

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What is one of the sectors emphasized for growth funds according to the text?

Real Estate
Oil and Gas
TMT (correct)
Automotive

Which of the following is NOT a stage in a Growth Fund's Sourcing Funnel as described in the text?

Deal Structuring
Risk Management
Deal Origination
Customer Service (correct)

What is the typical range of returns targeted by growth funds according to the text?

6x to 8x
3x to 5x (correct)
10x to 15x
1x to 2x

In what stage of the investment process do growth funds influence strategy, capital allocation, and risk management through board representation?

Investment Realization (C) Signup and view all the answers

Which type of firms use a large amount of preferred equity to receive dividends and lower risk as mentioned in the text?

Private Equity Firms (D) Signup and view all the answers

What is a common characteristic of middle market and lower middle market transactions mentioned in the text regarding leverage?

They avoid using leverage due to risk concerns (C) Signup and view all the answers

What is the typical exit strategy for a private equity investment?

Sale to a strategic buyer or another private equity firm, or IPO (B) Signup and view all the answers

Why is private equity often considered illiquid?

Because the investment requires a commitment period of 6-15 years (A) Signup and view all the answers

What is the primary source of capital in a 'bootstrap' acquisition?

Borrowed funds secured by the target company's cash flows (A) Signup and view all the answers

How does private equity typically contribute to a portfolio's liquidity?

By adding illiquidity premium and growth potential (D) Signup and view all the answers

Why is liquidity an important consideration in investment portfolios?

To be able to quickly convert assets into cash in times of need (C) Signup and view all the answers

What does it mean to 'sell liquidity' from a portfolio?

To tie up cash in illiquid investments, making it unavailable for immediate use (B) Signup and view all the answers

What is considered the most important factor in one manager's methodology for implementation?

Strategy (D) Signup and view all the answers

What is the key focus in the 'Talent Magnet' culture mentioned in the text?

Performance-oriented approach (B) Signup and view all the answers

What is the crucial aspect to consider in private equity to avoid a major mistake?

Running out of liquidity (C) Signup and view all the answers

What type of acquisitions are recommended in the text as a strategy for private equity firms?

'Add-on' or 'Bolt on' acquisitions (B) Signup and view all the answers

In private equity, what is emphasized as the primary focus for consistent success?

'Blocking and tackling' (B) Signup and view all the answers

What is Martin H. Dubilier's attributed quote warning against in private equity?